ASX closes lower on iron ore miners

Summary

DuluxGroup recommended a buyout offer from Nippon Paint to shareholders

China's economic data for March was well ahead of expectations

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4.21pm on Apr 17, 2019

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4.20pm on Apr 17, 2019

Australian shares closed lower on Wednesday, as gains from the major banks and a big jump from DuluxGroup failed to offset losses from the major iron ore miners.

The S&P/ASX 200 Index slid 21.1 points, or 0.3 per cent, to 6256.4 while the broader All Ordinaries closed 22 points, or 0.3 per cent, lower at 6350.3.

"The raft of positive China data released on Wednesday was a positive sign that Chinese domestic stimulatory measures are working to drive economic growth in China," said Ophir Asset Management director and senior portfolio manager Andrew Mitchell.

"Despite the positive China data, both large cap and small cap domestic stocks have been weighed down by the overnight fall in iron ore and gold prices."

BHP Group shares fell 2.7 per cent to $38.30 after the miner cut its iron ore production guidance and said it would face higher costs as a result of the fallout from the wild weather that hit its export operations in Western Australia.

The other major iron ore miners also closed lower as Brazilian miner Vale was allowed to resume production at its Brucutu mine with the move likely to push iron ore prices lower over the coming weeks. Fortescue Metals Group slid 8.5 per cent to $7.41and Rio Tinto declined 4.7 per cent to $96.40.

Challenger shares slid 2.4 per cent to $7.77 after reporting its third quarter performance. The company reported its total annuity sales for the quarter were down 13 per cent on the prior corresponding period with its Japanese annuity sales falling nearly 50 per cent. The company cited rising interest rates in the US for the slowdown.

The major banks closed higher, lifting the market. Westpac shares climbed 1.5 per cent to $26.81, Commonwealth Bank rose 0.8 per cent to $73.29, ANZ closed 1.2 per cent higher at $26.72 and NAB advanced 0.9 per cent to $25.24.

DuluxGroup shares soared 27.1 per cent to $9.75 after Japanese company Nippon Paint made a $3.8 billion takeover bid for the local paint manufacturer. The proposal is via a scheme of arrangement for $9.80 per share in cash, inclusive of a 15¢ interim dividend to be paid by Dulux. The DuluxGroup board unanimously recommended shareholders accept the offer, with a vote set to be held in July.

Telstra shares rose 2.1 per cent to $3.36 on Wednesday. UBS upgraded its rating on the company from 'neutral' to 'buy' and lifted its price target from $3.00 to $3.60 , saying numerous external tailwinds were buildings, particularly as the telco's 5G network came online.

Morgan Stanley increased its price target on aerial imagery company Nearmap, saying the group's expansion into the US had been successful and that it expected greater reinvestment from the company going forward.

The broker said the company's flagged reinvestment of $15 million into targeted expansion in the US, expansion into canada and product expansion across the board would be positive.

"Importantly, we believe investors expect a material step up in investment, and actively support it given the response to the raising and the fact the stock rallied as these initiatives were announced," said analyst James Bales.

Morgan Stanley lifted its price target on Nearmap from $3.00 to $4.20, at a 22 per cent premium to its Tuesday closing price of $3.44.

3.47pm on Apr 17, 2019

Australian Pharmaceutical Industries, the name behind the Priceline Pharmacy chain, says it will continue to review its holding in former takeover target Sigma Healthcare after reporting a flat first-half net profit of $25 million.

For the six months to February 28, total revenue reached $1.98 billion, down 1.6 per cent. However, after adjusting for the impact of lower sales of hepatitis C medicines and PBS reforms, revenue was up 6.6 per cent.

Earnings before interest and tax was up 5.8 per cent to $44.4 million, slightly ahead of guidance, primarily due to improved performance in both Priceline Retail and Consumer Brands, and from recently acquired Clear Skincare, which reported its first half-year contribution.

"It's fair to say we haven't met expectations for some time now," Blackmore said after releasing the result that left investors a bit shell shocked and initially pushed the company's share price down almost 7 per cent.

Blackmore is not suggesting the company can't retrace the losses and regain growth momentum, but he isn't making any promises on when this will happen nor is he applying spin to the challenges the company faces.

Marcus Blackmore is confident about finding a new chief executive.Credit:Louie Douvis

2.54pm on Apr 17, 2019

Santos has posted a record-breaking quarterly production result and announced new major gas discoveries while also flagging that it would have to review its earnings due to new oil taxes.

The company reported a 33 per cent production jump quarter on quarter to hit 18.4 million barrels of oil equivalent, just a day after it unveiled the new highly prospective Corvus oil and gas find off Western Australia.

"Santos's first quarter delivered record production volumes and a record free cash flow for a single quarter," Santos chief executive Kevin Gallagher said.

It generated a record $327 million in free cash flow for the quarter and paid down $1.1 billion in gross debt.

Santos has seen a massive jump in production even as it eyes new gas fields off Western Australia.Credit:Bloomberg

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2.31pm on Apr 17, 2019

Australian iron ore miners have shed more than $5 billion in value on Wednesday morning after Brazilian courts allowed Vale to re-open operations closed following a series of fatal mine dam disasters.

Vale's Brucutu iron ore mine will resume operations after it was closed when tailings dams burst in January, flooding the town of Brumadinho in Brazil's Minas Gerais state and killing hundreds. It means about 30 million tonnes of iron ore back will come back into the market.

The shutdown of Vale's mines and the forced closure of Western Australian ports by Cyclone Veronica in March caused a global iron ore shortage, driving up prices and buoying Australian miners' shares.

BHP, Fortescue Metals Group and Rio Tinto's share prices all reacted negatively to the announcement, with their shares shedding about $5.7 billion by midday on Wednesday.

China's growth stabilised at 6.4 per cent in the first quarter, helped by improved factory output in March and stimulus from Beijing aimed at arresting a broad slowdown in the world's second-biggest economy.

The growth in gross domestic product (GDP) matched the fourth quarter of last year and came in slightly higher than economists' forecasts of 6.3 per cent this time around.

China's first big data dump for the year lived up to the ruling Communist Party's rhetoric around economic management. The country's leaders have been ramping up infrastructure investment, cutting taxes and pump-priming the corporate sector to put a floor under slowing growth rates.

GDP growth is already at a three-decade low, but continues to outstrip other major economies.